An over-the-counter exchange, or OTC venue (from "over-the-counter" — "across the counter"), allows buying and selling cryptocurrency bypassing the public order book. Instead of placing orders in the shared order book, the parties agree on the terms of the deal directly: they coordinate the volume, price, and settlement method, while the venue or broker ensures the operation is carried out.
This format is in demand primarily for large volumes. If a large deal is executed through an ordinary exchange, it can noticeably shift the market price due to insufficient liquidity at individual order-book levels — this effect is called slippage. An OTC deal is carried out at a pre-agreed price, which reduces the impact on the market and makes the cost of the operation predictable.
How the over-the-counter format is useful
- execution of large volumes without a strong price move;
- a pre-agreed price and settlement terms;
- direct interaction between the parties or work through an intermediary broker.
When choosing an OTC venue, it is important to assess its reputation, the transparency of its terms, and its deal-protection mechanisms, since direct settlements require trust in the counterparty or a reliable intermediary.
